Answer:
ISO stands for "International Organization for Standardization" and is taken from the Greek word "isos", meaning equal. ISO has replaced the older ASA designation.
As for how it relates to film, it is an indicator of the film's sensitivity to light. Light sensitive crystals are an all or nothing proposition. They either react and are subsequently developed, or they do not, and the speed at which they react is the same for any given film. Therefore, if someone tells you it means how fast the film can react, they are technically incorrect. Film speed is more a function of the size of the crystals (grains), but speed is how it's described. The increase in sensitivity is a result of larger grains "grabbing" more light than smaller ones during any given exposure time. If this is difficult to grasp, think of them as tiny buckets gathering light. Larger ones gather more in the same time, thus laying down more image. However, a noticeable increase in the graininess of the image is usually associated with fast film, especially if it is enlarged to any great degree. Also, it is safe to say that doubling the number 400 vs 200) means the film is twice as "fast".
ISO 100 is wonderful for using when there is a good daylight or when you have bright light. ISO 400 is what you would use to photograph when there is low light, like when you are indoors, or at dusk or twilight. Then there are films which have ISO1600 or ISO3200, which you would use also in low light, but these would allow for faster shutter speeds.
You need to use a fast shutter speed to freeze any sort of action when you are photographing sports, action or even fast moving wildlife or birds. Usually well over 1/500th of a second. You may need to change your ISO setting to 400 to 800 if you want to use high shutter speeds, on not-so-bright days, that are overcast, cloudy or without sunlight.
(note: changing the ISO setting on a digital camera between shots is OK. With film cameras, it is not advisable to use a setting other than what the film calls for unless it is done for the whole roll of film, and then, only if you know what you're doing.)